Can Trump’s inauguration spark a new all time high?

After weeks of silence, Bitcoin has once again surpassed the $100,000 mark. With $1.54 billion worth of $120,000 call options and Trump-era crypto speculation, is the stage set for a major rally?

BTC exceeds $100,000 again

Bitcoin (BTC) has once again become the center of attention. After playing it safe in the $92,000 to $98,000 range for weeks, BTC broke the $100,000 mark and traded at $101,700 as of January 7. It is currently down 6% from its all-time high of $108,268.

BTC 3-month price chart | Source: crypto.news

Adding fuel to the fire, data shows investors piled into $120,000 worth of call options, with a staggering notional open interest of $1.56 billion as of Jan. 7. This shows that investors are counting on a rise that can take Bitcoin to new highs.

BTC’s open position based on strike price as of January 7 | Source: Deribit

A call option gives one the right (but not the obligation) to buy Bitcoin at a certain price later. It’s basically a bet that prices will rise even further.

Why all this optimism? As President-elect Donald Trump prepares to be inaugurated in the coming days, speculation is swirling that his administration could usher in a more crypto-friendly era.

So what does all this mean for the future of Bitcoin? Let’s dig deeper into the data, examine market sentiment, and examine what experts believe may unfold in the coming days and weeks.

What could Trump’s inauguration mean for crypto?

As Trump prepares to be sworn in on January 20, it will be a pivotal moment for the digital asset industry, setting the stage for changes in how cryptocurrency is managed in the United States.

One immediate shakeup will come from the resignation of SEC Chairman Gary Gensler, a polarizing figure in the crypto community known for his tough stance on digital assets.

The SEC’s current approach under SAB 121 requires publicly traded banks to record crypto assets as liabilities, making large-scale crypto custody a financially unattractive endeavor.

While Congress voted to scrap SAB 121 last year, that effort was vetoed by President Biden. Gensler’s departure could lead to a dramatic policy change as he is replaced by former SEC Commissioner and crypto-friendly Paul Atkins.

Meanwhile, Congressman French Hill stated that Republican leadership plans to prioritize a comprehensive regulatory framework for crypto. This effort builds on the FIT 21 bill, which was passed by the House in 2024 and aims to end the fight between the SEC and the Commodity Futures Trading Commission over who will regulate crypto.

While FIT 21 was hailed as a turning point, it did not go unchallenged. Some industry insiders feel the bill was rushed and overly restrictive, particularly in its treatment of decentralized finance.

Republican leaders have hinted that they may scrap FIT 21 and start fresh by focusing on innovation while addressing concerns voiced by the DeFi community.

But beyond immediate policy changes, Trump’s inauguration could signal a significant shift in tone. His campaign rhetoric has positioned him as a “crypto president,” and the industry is eager to see whether he will follow through on promises like establishing a U.S. Bitcoin reserve or creating a federal crypto council.

Of course, none of this happens alone. The macroeconomic backdrop (interest rates, inflation data, and overall market sentiment) will play a critical role in shaping how the cryptocurrency performs in the coming months.

Macroeconomic headwinds: What does this mean for Bitcoin?

This week, a number of key macroeconomic indicators will paint a picture of the health of the US economy, and their implications for the crypto industry are worth examining.

The action starts with the Jan. 8 ADP National Employment Report, which will show how many new jobs the private sector added in December. Analysts are forecasting 130,000 jobs, down slightly from 146,000 in November.

January 9 reveals another piece of the puzzle with the weekly unemployment claims report. It recently fell to an eight-month low, signaling that employers are retaining workers despite the economic slowdown. If demand remains low, it could strengthen market sentiment and encourage investors to take more risks, which could benefit Bitcoin.

On January 10, all eyes will be on the US Consumer Confidence Index. This metric reflects how optimistic people feel about the economy and their willingness to spend. If the index comes back strong, it could encourage risk-taking among investors and provide a potential boost to Bitcoin.

But there is another development: Consumer sentiment often points to inflation expectations. If people expect inflation to rise, Bitcoin may see renewed interest as a hedge against diminishing purchasing power. But on the other hand, inflation concerns could encourage the Fed to raise rates, which could keep crypto gains in check.

The week ends with the US employment report and unemployment rate. Analysts expect 155,000 new jobs, down from 227,000 in November, while unemployment is projected to remain steady at 4.2%.

Strong employment data generally boosts market confidence and increases interest in risky assets like Bitcoin. On the other hand, weaker data may prompt investors to err on the side of caution and make safer bets.

Ultimately, the Federal Reserve’s position will become clear later this month when the Federal Open Market Committee releases its meeting minutes. These will provide clues about the Fed’s thoughts on whether to cut rates in 2025 or not.

Currently, markets are closely watching the FOMC meeting to be held on January 29. As of now, there is only a 9.1% chance that the Fed will cut interest rates by another 25 basis points.

In this context, the Fed had already cut 25 basis points in December and 50 basis points in September. These rate cuts injected liquidity into the market and increased the flow of money into risky assets, triggering Bitcoin’s rise.

However, at the December meeting, Fed Chairman Jerome Powell used a hawkish tone, signaling that future interest rate cuts would largely depend on future economic data. The stance appears neutral for now, with a 90% chance that the Fed will leave interest rates unchanged at the end of this month.

But any macroeconomic shock in the coming days—whether surprising inflation numbers or unexpected labor market data—could quickly change the Fed’s course and potentially impact Bitcoin and the broader crypto market.

Rising prospects of the crypto industry

The crypto market has always thrived on narratives, and the Trump administration’s new policies are shaping up to be compelling.

Ripple CEO Brad Garlinghouse recently tweeted about this shift, noting how the “Trump effect” is reviving confidence in the US crypto sector.

2025 is here and the Trump bull market is real. For Ripple, this became even more personal after Gensler’s SEC effectively froze our business opportunities here for years. The optimism is obvious and richly deserved.

Today:
✅75% of Ripple’s open roles are now US-based, whereas…

— Brad Garlinghouse (@bgarlinghouse) January 5, 2025

Ripple, which spent years trying to resolve regulatory challenges under Gary Gensler’s SEC, has already undergone a major shift. Garlinghouse shared that 75% of Ripple’s open positions are now US-based, a dramatic reversal from recent years when most hiring was overseas.

Even more striking, Ripple signed more US deals in the six weeks following Trump’s election than in the previous six months; This is a sign that there is palpable optimism in the industry.

Meanwhile, Trump’s picks for key roles, including Scott Bessent as Treasury Secretary and David Sacks to head the newly launched AI and Crypto Division, signal a pro-innovation stance that could fuel growth.

On a broader economic front, Hunter Horsley’s hypothesis is more intriguing. He suggests that the Trump administration could unravel mergers and acquisitions, thus further consolidating the power of big companies.

The Trump administration may unravel mergers and acquisitions.

Large companies (mag 7 etc.) can finally sustain their market capitalization. Amazon may acquire Instacart. Google may buy Uber. etc etc

The big one can grow, the middle one can shrink.

I think it will go faster if this happens…

— Hunter Horsley (@HHorsley) January 5, 2025

If tech giants like Amazon or Google start to catch up with their rivals, the narrative of distrust towards centralized entities could become even stronger.

Horsley suggested that cryptocurrency, which has been successful in offering an alternative to traditional institutions, may find itself in a unique position to benefit from this wave of consolidation.

As “the big ones get bigger,” blockchain’s decentralized promise may resonate even more with individuals and businesses seeking independence from corporate overreach.

But optimism needs to be tempered with pragmatism. Although the first signals from the Trump administration are in favor of crypto, it is critical to recognize that policy changes will take time.

However, the fact that these talks are happening at the highest levels of government and the market’s renewed energy is a strong signal that 2025 could be a turning point for crypto.

Where can Bitcoin go next?

In his latest tweet, crypto analyst Michaël van de Poppe pointed out the Rainbow Chart, a long-term indicator that divides the Bitcoin price into various zones, from the “Fire Sell” to the “Maximum Bubble Zone”.

rainbow chart #Bitcoin It is a good indicator.

It is telling that the previous cycle did not engage in the kind of euphoria we usually witness in the Bitcoin cycle.

Because of this cycle, expectations from this cycle are significantly diminished as PTSD kicks in. pic.twitter.com/3meyQCLrca

— Michaël van de Poppe (@CryptoMichNL) January 5, 2025

“Anything under $110K is classified as ‘Savings,’ while the range between $110-$150K is considered ‘Still Cheap,’” explains Van de Poppe.

At current levels, Bitcoin remains in what is called the buy zone; This is a sign that the market has not yet reached the kind of euphoria typical of previous cycles.

He attributes this to a type of market PTSD, where scars from previous crashes dampen the bullish sentiment. However, he suggests that this pessimism may be misplaced, saying: “People really don’t expect this cycle to be this high and extreme. “I think this will be broadly comparable to the 2014-2017 cycle.”

According to the Rainbow Chart, reaching even the lower bounds of the “red zones” historically associated with market tops would require Bitcoin to surpass $250K, with some phases reaching $375K or higher as time progresses.

However, while van de Poppe paints an optimistic long-term picture, Benjamin Cowen focuses on the short-term trend. Cowen notes that if Bitcoin revisits its short-term trend line, it could reach $120,000 by Trump’s inauguration on January 20.

Cowen’s analysis is in line with current market sentiment, with investors eyeing key psychological levels like $120,000 as potential stepping stones for further gains.

But the Fed’s meeting on January 29 looms large and there’s over a 90% chance that rates will remain unchanged. While this neutrality may initially seem neutral, employment data, inflation figures or any unexpected macroeconomic shock in global markets can lead to sharp corrections.

As this exciting cycle progresses, it will be crucial for investors to stay informed, diversify, and follow macroeconomic signals closely. Always remember the golden rule: Never invest more than you can afford to lose.